Yahoo Finally Pulls The Plug On Right Media Exchange

Most would argue that Yahoo’s de facto policy on the Right Media Exchange had been “do not resuscitate” for quite some time – but now RMX is officially off life support.

Several sources tell AdExchanger that Yahoo is finally shutting down the exchange for all non-Yahoo owned and operated networks and publishers. Depending on your point of view, the collapse is either the latest in a string of failed ad tech acquisitions at the company, or a step toward fulfilling CEO Marissa Mayer’s dream of turning Yahoo into a destination for premium advertising.

Yahoo, which bought Right Media way back in 2007 for a cool $680 million, recently sent an email to the few remaining sellers on RMX – primarily performance ad networks – informing them that the platform would imminently be closed to third parties and non-Yahoo sites. It’s possible that the process will be completed as early as next week, according to one source.

For many in the programmatic space, the shutdown will not come as a shock. Sources report impression volume has been very low for months after years of customer attrition on the supply side. Advertiser demand too has suffered, as buy-side partners have reacted to declining quality in the marketplace.

App analytics company Flurry, which Yahoo acquired in July, could be a strategic part of the post-RMX plan. As The Information reported this week, Yahoo wants to merge Flurry with its Gemini self-serve marketplace for mobile ads, creating an exchange-like platform for app inventory. Yahoo has so far declined to confirm the plan.

“Word is, Flurry will replace that stack and it’s about time,” an industry source told AdExchanger, noting that RMX “has been a swamp” and that ROI was not “justifiable.”

But, given Yahoo's many failed, unfulfilled and what-ever-happened-to ad-related mergers over the years (Interclick, BlueLithium and Overture, to name three biggies), is there any reason to think things will go better with BrightRoll and Flurry?

Hope springs eternal.

The chain of events that led to the shutdown of Right Media will be familiar to many longtime observers of the digital ad space, but some particulars have not been widely reported.

According to one source, one of Yahoo's early stumbles with Right Media took place about two years after the acquisition, when the company canceled the consulting contract held by IPONWEB, the ad tech engineering company that built much of the exchange and later helped maintain its infrastructure. The company then failed to make the necessary technical investment to keep the platform competitive with new marketplace entrants, such as Google's DoubleClick Ad Exchange and AppNexus.

More recently, Yahoo is rumored to have rebuffed an approach by AppNexus, which wanted to acquire Right Media in exchange for a significant stake in its business. The offer, according to one source, was to trade the ad exchange for a 25% stake in AppNexus. When Yahoo management walked away from that deal, AppNexus ramped up its business development efforts and began individually poaching many of Right Media's existing publisher and ad network customers, including CPX Interactive in 2011.

It was this lack of investment from management that led to the exit of many of Right Media's original leadership team, including Mike Walrath (who left in 2009), Bill Wise (2010) and Ramsey McGrory (2011).

Yahoo has periodically sought to burnish RMX. In 2012, it launched some new features including brand-safety tools and more granular targeting. “Yahoo is more than just an online publisher – it’s also an important platform that maximizes yield for Yahoo and its publisher partners,” said Yahoo’s SVP of display and ad tech, Scott Burke, at the time.

But these efforts were inadequate to overcome market challenges in the form of rising digital ad fraud, the acceleration of mobile and well-capitalized competitors.

As the years ticked by, RMX became more and more of a footnote, both at Yahoo and within the industry as a whole. At last year’s CES show in Las Vegas, Yahoo announced that Right Media, along with Yahoo’s data-management arm, Genome, would be subsumed into Yahoo Advertising as the rebranded Yahoo Ad Exchange, which launched in Q1 2014.

Yoav Naveh, CEO of performance ad exchange ConvertMedia, said his firm has been onboarding ad networks that had previously been plugged into RMX. He said several dozen have moved their traffic over to Convert already.

“About six to eight months ago we started to hear that Right Media was starting to make a final move,” Naveh told AdExchanger. “First there was a round of minimizing activity and putting restrictions on partners. Then we heard from one of our clients at the close of Q4 [2014] that they’d received a formal letter that Right Media was going to be officially closed to non-Yahoo sites.”

Why now? It’s possible that the revenue coming in from RMX wasn’t enough to justify the costs of overhead, auditing and infrastructure to keep the thing going. That, and the fact that Yahoo might no longer want to be associated with the less-than-stellar inventory from publisher sites outside the more brightly lit Yahoo supply pool.

While it’s not impossible to run an exchange that’s friendly for both brands and performance advertisers – Google, Rubicon Project and Casale have all been praised for their supply hygiene – Yahoo seems to be saying that that’s not where they want to be.

“If you’re a platform, you need to be a gatekeeper and you constantly have to check on and revisit what you’ll allow and what you won’t allow,” Naveh said.

With RMX officially shutting off access to sites that aren’t in the Yahoo family, Yahoo’s ad business is on it’s way to becoming a pure DSP – which might be what brands want from Yahoo. And Yahoo wants more brands.

Yahoo did not respond to an interview request at the time this story first published.

Updated 1/9/14 at 3:12 p.m.

Yahoo's official statement on the matter:

"Yahoo is progressing the Yahoo Ad Exchange to more properly reflect its place in our business strategy. Yahoo Ad Exchange will continue to be home to display inventory for Yahoo sites and other hand-selected premium sites. We will continue to buy display inventory on behalf of our advertisers, using Yahoo programmatic buying tools connected to other marketplaces."

2 Comments

Interesting to note that Bill Wise, CEO at MediaOcean, was in a position to see IPONWEB up close while he was at Right Media, since Media Ocean and IPONWEB provide so many critical IT services to the advertising industry.